GSK Avandia settlement: round one in a long legal fight

GlaxoSmithKline has settled its first case involving former diabetes blockbuster Avandia, but it will most certainly not be the last word on the matter.

GlaxoSmithKline has settled its first case involving former diabetes blockbuster Avandia, but it will most certainly not be the last word on the matter.

The London-based pharmaceutical company, which has its U.S. headquarters in North Carolina’s Research Triangle Park, settled Deborah A. Burford v. SmithklineBeecham Corp. just before the trial was scheduled to start today. Deborah Burford sued GSK (NYSE:GSK) after the death of her husband James Burford, a North Carolina man who used Avandia for 15 months for his diabetes before dying of a heart attack in 2006. The suit claimed GSK refused to take Avandia off the market despite studies showing that the drug increased the risks of heart attacks and strokes.

GSK still faces thousands of additional lawsuits regarding Avandia, which was suspended from the European market in September and allowed to remain in the U.S. market only with strict warnings. Those restrictions followed growing scrutiny of the drug last summer as U.S. and European regulators continued to probe alleged ties of the drug to increased cardiovascular risks.

To get a better sense of how this legal settlement could play out for GSK, consider another former blockbuster drug whose downfall followed links to cardiovascular risks: Vioxx. Merck (NYSE:MRK) withdrew the drug in 2004 after clinical studies showed the drug increased risks of heart attack and stroke. A flood of lawsuits followed. Merck chose to litigate, rather than settle. It lost its first case, resulting in a $253 million award to the plaintiff. But Merck won many of the subsequent cases that went before juries, making settlement a more attractive option for many plaintiffs. In 2007, Merck agreed to pay $4.85 billion to settle more than 26,000 cases.

Terms of the settlement in the Burford case were not disclosed. The lawsuit had sought damages of $1.3 million to cover economic damages, including the loss of Burford’s income. Non-economic damages, such as pain and suffering, emotional distress and punitive damages to GSK, were to be determined at trial.

It’s not yet clear whether the Burford settlement could pave the way for future Avandia settlements. But GSK has armed itself for the legal battle; this month the company announced it was setting aside $3.4 billion to pay for legal costs related to Avandia. How the next few Avandia trials shake out could determine whether GSK will be reaching settlements with most of its plaintiffs or whether the company will choose to litigate the cases in hopes of winning some decisions. Either way, GSK will pay. Don’t be surprised if GSK makes additional announcements of legal charges reaching into the billions of dollars.

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